’Fortune 500’ of 1812 Shows U.S. Banks’ Early Influence

By Richard Sylla and Robert E. Wright -
Apr 10, 2012

Fortune magazine began publishing
annual rankings of U.S. corporations by revenue in 1955. Ever
since, scholars and forecasters have analyzed changes in the
Fortune 500 to help inform their judgments about industry
concentration and the relative importance of different sectors
of the economy.

Historians would love to have snapshots of the nation’s
largest corporations at earlier dates. Unfortunately data are
scarce, especially before the Civil War. Based on our research,
however, it is now possible to create a sort of historical
“Fortune 500” ranked by corporate capitalization -- the total
sum stockholders were supposed to pay for their shares.

Conveniently for us, states regulated corporate equity
capital, sometimes by specifying a precise amount of capital but
other times indicating an acceptable range. They usually
published the figure or range as part of the laws that
incorporated each company. We have compiled that data here to
provide a snapshot of the U.S. economy in 1812. (See graphic.)

Finance Dominates

Banks and insurance companies dominate the list, reflecting
the financial revolution launched two decades earlier by
Alexander Hamilton and the Federalists. In 1812, all of the top
five companies, and nine of the top 10, were banks. John Jacob
Astor’s American Fur Co., coming in at No. 9, completed the top
10. The finance sector made up 44 percent of the 500 largest
corporations and 72 percent of all the authorized capital that
year.

In transportation, most non-trivial bridges, canals and
long-distance roads were then privately owned corporations.
Usually they weren’t extensive affairs, thus explaining their
conspicuous presence in the bottom part of the rankings. The
transportation sector comprised 32 percent of the companies, but
only 14 percent of the capital.

Manufacturing, often thought to be a later development in
the U.S., actually had a strong presence in 1812. Manufacturers
accounted for 20 percent of the 500 largest companies. But like
transportation, manufacturing’s share of corporate capital was
far lower, only 11 percent; large-scale manufacturing was still
in America’s future.

The biggest American corporation in 1812 was the Bank of
the United States, chartered by Congress in 1791. Ironically,
Congress refused to renew the bank’s charter in 1811, so in 1812
it was in the process of being liquidated. In 1816, Congress
would charter an even larger central bank, which would meet the
same fate in the 1830s at the hands of President Andrew Jackson.

Two other banks in the top 10 are still with us. The City
Bank of New York (No. 5), founded in 1812, is today’s Citigroup
Inc. (C), observing its 200th anniversary this year. And the
Manhattan Co. (No. 8), more recently known as Chase Manhattan,
survives as part of JPMorgan Chase & Co. (JPM) Bank of New York (No.
37) is also still around, with Mellon added to its name.

Economic activity at the time was still heavily
concentrated in the Northeast. New York, Massachusetts and
Pennsylvania had chartered the most corporations in our 500.
Together they account for 63 percent of the companies and 56
percent of corporate capital.

A few caveats call for attention. Although some of the
companies in the list, such as Bank of New York, exist in
substantially the same form today, others, such as Bank of
America (No. 2), aren’t related to extant businesses other than
in name. Some surviving companies have long since lost their
original identities in mergers; for example, Bank of North
America (No. 36), the DNA of which is now a part of Wells Fargo
& Co. (WFC) The fate of many smaller companies in the list,
particularly the turnpikes, is unknown; in many cases, their
facilities eventually became part of the public-road network.

Corporation Nation

The larger significance of being able to come up with a
Fortune 500 for 1812 demands some reflection. The country’s
population then was about 7.5 million, less than that of New
York City today, and far less than the populations of leading
European nations. Yet international comparisons, to the extent
we can make them, indicate that the U.S. already had more
business corporations than any other country, and possibly more
than all other countries put together.

France had chartered 13 corporations by 1812, and Prussia
had chartered eight. An old source indicates that England had
only 156 joint-stock companies before 1824, and so the entire
U.K. probably had no more than 200 to 300. In contrast, our U.S.
data show more than a thousand charters by 1812.

The U.S. was the world’s first “corporation nation,” and
the ease of incorporating businesses released a lot of
entrepreneurial energy that helped to build an ever-expanding
economy. By the end of the 19th century, the U.S. would be the
world’s largest national economy with tens of thousands of
corporations.

Americans continue to have mixed feelings about
corporations, just as they did in 1812 and throughout our
history. But there’s no denying that the corporation played a
large role in making Americans who they were -- and are.

(Richard Sylla is Henry Kaufman Professor of the History of
Financial Institutions and Markets and a professor of economics
at New York University. Robert E. Wright is the Nef Family Chair
of Political Economy at Augustana College in South Dakota. The
opinions expressed are their own.)

To read more online from Echoes, Bloomberg View’s economic
history blog, click here.

To contact the writers of this post: Robert E. Wright at
robert.wright@augie.edu and Richard Sylla at
rsylla@stern.nyu.edu.